New Huge Deal Help!!!!!!!!

[Stanfield]

This was posted on my favorite site this weekend.  What do you think of this deal?

286 unit apartment complex (Currently non preforming). Needs rehab - The asking price is firm at $2.5 MIL. There is a bid for $1.5 million for repairs... C property... mix of 1 and 2 bedroom units (mostly 2 bedrooms) Great sec. 8 property with huge upswing potential! Property proforma, property pictures and a video of the property are available upon request, to those who are serious. Projected Gross rents of $1.8million check rough numbers below, and there is access to section 8 tenant waiting list that is available:


$1,850,000.00 Gross
- 925,000.00 Expenses (following 50% Rule)

____________
$925,000.00


Even if you have a mortgage at $25,031.22 a month(90% of total aimed at 40 years) that still leaves $624,625.36 per year and it pays for itself in 6.5 years. The latest appraisal was done in 2007 (before the market crashed) and it was valued at over $6MIL.

I know it would be a huge project to undertake, but there is a huge potential to make $ here. Let me know if you know somebody or someone who is a serious cash buyer, and who is very interested. We need to move this property, within this weekend and next week. Give Dallas a call at (206) 337-xxxx, today.

Thanks & Have a great week.

[propertymanager]

Here is how I would evaluate this deal:

NOI:  $77,083 per month

Debt ($4,000,000, 30 yr, 7%): $26,612

Cash flow: $50,471 per month or $176.47 per unit per month, WHICH IS EXCELLENT!

So, there is a HUGE problem here somewhere if this property is non-performing!  Obviously, there is a ton of deferred maintenance and therefore probably a high vacancy rate.  Also, the mix of 1 and 2 bedroom apartments isn't good (I would like to see a lot of 3 bdrms in there).  So, the key here is to determine why the current owner has failed and determine if that can be corrected.  In addition, a potential buyer needs to determine what it will cost to hold this property during the turn-around!

Mike

[tatertot]

286 Section 8 tenants in one place? My hair is standing on end. (Normal people refuse to live in a building full of Section 8)

Budget a huge amount for damage repair-- it has to be done yearly, not just when the tenant moves out, or Section 8 will withhold your rent.

Not a lot of Section 8 can take a one bedroom. They almost all have kids. They also usually get enough assistance to rent a house, not an apartment, so you would get the dregs of the dregs.

Suggestion: look into converting it to HUD senior housing. There's usually a waiting list for those and your tenants wouldn't be so much trouble, and would have a lot more demand for 1-2 bedroom.